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As the world's markets continued to tumble and stumble late in August, China once again took action to attempt to shore up its economic plight by reducing bank reserve requirements by 1/2 a percentage point while its central bank cut interest rates by 1/4 of a point. The People's Bank of China also removed the ceiling on most bank deposits. Meanwhile, many of China's electronic supply chain participants continued to scramble in the face of reduced exports and higher costs.

August 2015

Times have certainly changed! I never thought I would see the day when one of the world's most monolithic societies would elect a foreigner (gaijin) to the Board of Trustees of one of its trade associations.

Congratulations to Julian Bashore, Managing Director Japan of MacDermid Electronic Solutions, upon his election to the *JPCA's Board of Trustees. Bashore will join executives from such firms as Fujitsu, Ibiden, Meiko, and Nippon Mektron for a two year term.

*Japan Electronics Packaging and Circuits Association.

It’s almost "official "

The U.S. is now competitive with Chinese manufacturing according to the Boston Consulting Group (BSG). It is now barely cheaper to produce goods in China in the U.S.

The New York Times reported that the BSG says that manufacturing wages adjusted for productivity have nearly tripled in China over the last decade, from $4.35 an hour in 2004 to $12.47 in 2014. Meanwhile, U.S., manufacturing wages adjusted for productivity have risen less than 30 percent since 2004, to $22.32. However, these higher wages are offset by lower costs for energy and raw materials.

The net result is that the total cost to manufacture goods in China for every $1 required in the U.S. is now $0.96. Boston Consulting also states that the U.S. is becoming more competitive with other nations as well. It now costs more than $1 to manufacture goods in Korea for every $1 required in the U.S., and between $1.10 and $1.20 in Canada, Sweden, Japan, and the Netherlands. Further, for every $1 required in America, it costs between $1.20 and $1.30 to manufacture goods in Germany, Italy, Brazil, Belgium, France, and Switzerland. Only India and Indonesia of the “major nations” now cost less than $0.90 to produce products for every $1 needed in the U.S. , and India, with a large domestic market potential, still seems to lack the infrastructure needed to support “major” electronic manufacturing.

Does this make the U.S. truly competitive? Not when taxes, regulations, and lack of the requisite skilled educated labor pool is considered.

DKN Research reports that that sales of rigid printed circuit boards from Taiwan companies (Taiwan and China production) declined in April an May and now register a double digit decline from the same period last year.

"Equipment manufacturers and printed circuit manufacturers there released pessimistic forecasts for the second half of the year. They blame their pessimism on slow sales from personal computers, and they expect a negative growth from Tablet PCs this year." DKN believes that the business trends for Taiwan's printed circuit industry represent the global market trends for consumer electronics. For this reason, DKN does not have an optimistic outlook for the consumer electronics industry this year.

Advanced Semiconductor Engineering (ASE), the world’s largest chip packager and tester, yesterday said its revenue growth would slow this quarter. ASE just posted net income of $116.8 million, down 18% quarter-on-quarter and 28.5% from the previous year.

“At best, the situation in the first half can be described as an environment filled with mixed messages,” ASE chief operating officer Tien Wu said, citing a downturn in the PC industry and tight inventory controls in the semiconductor supply chain.* The company forecasted limited growth of 1%-5% for the 3rd quarter for its core integrated circuit assembly, test and material (IC ATM) business. This quarter, ASE’s EMS operations should increase 7%-8% from last quarter with a slight decline in gross margin.

*I wonder how much of the "mixed message" was really due to the Apple Watch's below break even level of 2 million units per month during the 2nd quarter. ASE uses SiP process in order to fit all the components and circuitry into the "watch's small space.

Recent major semiconductor IC industry consolidation activity

NXP is buying Freescale for $16.7 billion, Avago is buying Broadcom for $37 billion, Intel is buying Altera, GlobalFoundries was paid over $1B (by IBM) to "buy" IBM Microelectronics, and China's Tsinghua bid $23 billion for Micron Technology.

July 2015

Hot topics

What keeps you up at night that you would like to see addressed by the IPC and the other trade associations to which you belong? Supply chain issues? Government regulations? Fewer "local" suppliers? IP issues? Lack of sufficient technical support/training by suppliers? Restoring the IPC Leadership Council and Programs of yore? How about better planning and coordination by the members of WECC to prevent schedule conflicts of its own members' major annual exhibits?

Write to us and let us know. The IPC Ambassadors are considering generating a series of 10 minute videos, each addressing one topic, that would be made available as "pod-casts" on the IPC web site.

How will Platform Specialty Products acquisition of OMG's electronic chemicals group and Alent (Alpha and Enthone) affect the industry? Alpha should provide a new substantial and stronger entry to the SMT materials market? It will certainly be a challenge to simultaneously rationalization both of the OMG and Enthone acquisitions to trim $50 million out of the combined group's annual operations as they are merged with Platform's MacDermid. Will Platform be able to power its way into becoming "the" leading supplier of the consolidating customer base? Does this make sense in view of the continued consolidation of the fabricators and EMS providers? Will it strengthen Atotech's position in Asia? Will it encourage other competitors such as Uyemura and Technic to be more aggressive?

A new all-encompassing approach 

CCL supplier Isola and Semico Research, a semiconductor marketing and consulting research company, have teamed up to launch Boards, Chips and Packaging: Designing to Maximize Results.
This new industry event will span the system-level ecosystem to address the roles of system architectures, board design, chip design, package design and final fabrication and assembly processes for hardware product development. The one-day conference will take place on October 13, 2015 under the auspices of Semico's IMPACT Conference series at the Computer History Museum in Mountain View, California.

SEMICON seemed slow this year. What was of note to me was the nearly total absence of almost the entire group of well-known specialty chemical supply chain members. No photoresist suppliers. No electroless or electrolytic plating providers. No resist developer or stripper solutions. No chemical etchants. We did see Kyzen and stopped at their booth for a chat but did not learn or see anything truly new. The show's "hot topics" seemed to center around the drive to 7 nanometer circuitry, 3D packaging, and the challenges of  EUV lithography (Extreme Ultra Violet).  ESI's booth focused on chemical metrology for the challenges of 10 nm and beyond. MIRTEC introduced its MP-520 3D packaging inspection system capable of measuring chip tilt, height as well as finding chips and cracks with a 0.4 nm tolerance.

There are now SEMICON events in Japan, China, South America and Taiwan. The market in the latter (September 2-4) will remain the world's largest, exceeding $12 billion for equipment and $9 billion for materials this year.

Is it time for the IPC to re-establish its leadership council and events geared to senior executives from the board and emerging technology industries?  Perhaps emulating SEMI's ISS 2016 (Industry Strategy Session) would be a good way to start. A few key questions remain. "Would IPC members support this type of event? Can factious groups be brought together to achieve a sound, successful program? What specific topics would make sense? Has the consolidation of industry segments hurt or helped their future?"

Virtually all of Taiwan's and China's major flexible circuit and HDI makers are now forecasting a strong second half for 2015. Taking a longer view, Taiwan's TPCA is focusing on technology for electronic automotive automation. Yet, major equipment suppliers to the region's PCB and SMT operations are bemoaning the continued drop in orders for new production equipment. One supplier stated that one of his customers wanted to have a 20 year old system refurbished rather than buy a new up-dated version with greater capabilities - until he learned that the refurbishing would cost more than a new system, and, it would carry no warranty. We expect further consolidation as well as belt-tightening on the supply side.

IBM said, just prior to SEMICON, that it had made working versions of ultradense computer chips, with roughly four times the capacity of today’s most powerful chips.
An international consortium led by IBM is part of an effort to manufacture the most advanced computer chips in New York’s Hudson Valley, where IBM is investing $3 billion in a private-public partnership with New York State, GlobalFoundries, Samsung and equipment vendors.
This answers the question as to whether or not Moore’s Law would continue past the current 14-nanometer generation of chips. The industry is currently making the commercial transition from 14-nanometer manufacturing to 10-nanometer manufacturing.
Working samples of chips with seven-nanometer transistors have already been made using silicon-germanium instead of pure silicon in key regions of the molecular-size switches.
The new chips will provide a major challenge to EUV stepper makers and facility designers to totally eliminate any vibration during the photolithography imaging process.
They will also initiate a new round of technology roadmaps for substrate makers.

Also of note just before the show was Tsinghua's $23 billion bid for Idaho-based Micron Technology. The Tsinghua Unigroup is China's largest state-owned chip design company.

Dilemna or dilemma? Time for a tough decision in planning (and spelling)

*March 15-17 are the dates for two of our industry's major exhibits and conferences.

One is in Las Vegas sponsored by the venerable IPC, the industry's most senior trade association and the world's leading printed circuit standards generator. The U.S. now produces less than 5% of the world printed circuits (including HDI, flex and organic substrates for ICs).

The other is in Shanghai and was formerly known as the CPCA show sponsored by the China Printed Circuit Association. It has been re-named the "China International PCB And Assembly Show". It will be co-located with SEMICON China 2016, Electronica & Productronica China, and Laser World Photonics China. "Greater China" produces more than 75% of the world's printed circuits.  The majority of this output is made by offshore (including American and Taiwanese) transplants. The world's largest Cu-clad laminators are in China. The greatest portion of specialty process chemicals is made in Asia. Expo Electronica in Russia is also held on these dates.

SMT/Hybrid/Packaging and Nepcon China also clash on April 26 – 28.

*The other major PCB events are Productronica (Munich Germany, November) the International Printed Circuit & Apex South China Fair 2015 (Shenzhen China, December, jointly produced by the HKPCA and the IPC), and the JPCA Show (Tokyo Japan, June).

How does this affect YOU? Most manufacturers of equipment can only afford to have one set of demo equipment, which is constantly travelling from show to show. It can take a month to move a piece of production equipment from one country to another, by the time that shipping, paperwork, customs, etc. are arranged. By spreading equipment and manpower across so many different countries and venues, visitors are less likely to see the latest equipment or be able to speak to the senior personnel as the latter can only be in one place at one time.

Which event will YOU attend, and why? Check out the responses on our Comments and Discussion page !

June 2015

A new report states that the differential between manufacturing costs in the U.S. and China are now only 5%, thanks to the continued annual mandated wage increases in China. China has just lowered interest rates and loosened some banking regulations to spur its economy.

What do YOU think the U.S. government must do to reignite electronic manufacturing in the homeland? Do you think that it is possible given the size of the markets in China, India, and elsewhere? See Dick Otte's well-thought out remarks and Dr. Hayao Nakahara's bold assessment on our "Comments & Discussion" page!

Send us your thoughts and comments.

What kind of supply chain opportunities will emerge for wearable electronics? Forecasters are saying that the market will surpass $18 billion in just 5 years! That number is larger than the entire current global airline industry!

They will certainly include flexible and stretchable substrates; abrasion and moisture resistant flexible as well as rigid conformal coatings; curved screens, synthetic sapphire screen covers; bendable display screens; new conductive and resistive fine screen inks; conductive fabrics; printed batteries and semiconductors; heat dissipating fibers or substrates; flexible batteries; self energizing (microbe, heat or solar driven) batteries; graphene-based filters conductors and displays; flexible printed transmitters and receivers; printed sensors (ECG); flexible conductive adhesives; reel-to-reel processing, assembly, and direct imaging equipment with better than 15 micron resolution and 2.5 micron repeatability; new test equipment - to mention just a few.

Did you know that China buys more than half the world’s semiconductors sold each year, but only produces 10% of local demand? Its government is now stating that it plans to invest up to $160 billion over the next 10 years to develop chips. The cost to build a state-of-the art chipmaking plant, which could become obsolete in just 5 years, is $5 billion. China will need foreign experience and help to succeed. In the interim, foreign chipmakers are increasing their investments to upgrade its Chinese plants and in state-run mobile chipmakers. (Source: Bloomberg Business, June 25).
Think about it! 10 years is really a very short time. The world can change dramatically in that period.

There weren't any new industry shattering products at the JPCA show according to our colleague D. Numakura. There were, however, a few new technologies targeting specific applications. Many companies there stated that they are focusing a lot of their R&D toward the wearable electronics supply chain.

Murad Kurwa, Vice President of Engineering at Flextronics International, will present “Wearables Technology - The Next Manufacturing Wave” to the attendees of SMTA International's Evolving Technologies Summit on September 28.

Platform Specialty Products will acquire OM Group’s Electronic Chemicals and Photomasks businesses by the end of this year. Operations are expected to be merged into the company's MacDermid subsidiary.

One can only wonder if any other larger consolidations are in the offing. There aren't many possibilities left. We have been apprised of a number of smaller M&A activities on all sides of the buy-sell-spin-off-JV equation.  It will be interesting to see what the electronic packaging-box build supply chains look like in 3 to 5 years. How many historic names will join those that have vanished in the last decade?

New American source for laser drills?

Nano System in New Hampshire is building a custom UV/CO2 laser for Nova Drilling Services of Santa Clara California to meet increased small via drilling requirements of its customers.

May 2015

China launched three new "free trade zones" (FTZ) and announced the quadrupling of the first one established in Shanghai in September 2013. The new FTZs will be in Guangdong, Tianjin, and the southeastern province of Fujian.

PCB fabricator Unimicron Technology losses of $18.92 million in the first quarter of 2015 were more than double those of a quarter earlier. The company also reported sales of $435 million for the first quarter of 2015, down 19% from a quarter earlier and 1% from a year ago 

Is it time to review your markets, goals, and position in the electronic packaging supply chain?

Opportunities abound. The overall market is huge. But, where do YOU fit?

According to Mike Buetow 's column this month in PCD&F/Circuits Assembly the EMS market reached $490 billion last year, up about 11% based largely on demand for automotive applications and handheld assemblies. This excludes captive production.  Foxconn alone accounted for nearly 28% of the world's EMS business. The next 49 largest ranked companies accounted for approximately another 40% leaving the rest of the world's  EMS companies a $158 billion market from which they gain their market share.

Do you know where your company’s wares fit?* Upon what do they depend (specifications, your on suppliers, compatibility with other suppliers and products used by your prospects and customers)?  What are the performance requirements (standards, environment)?  Who are the competitors and what are their strengths and weaknesses? What is the competitive situation (performance, cost/price, delivery system, inventory, service)? What are the requirements to maintain your position or break into a new market (with either in-kind or not-in-kind technology)? What the areas of dissatisfaction that customers/prospects have that can be exploited by improved or better supplies or a different manufacturing system?  Do you need the approval or support of a major OEM (e.g., Apple, Google, Ford) to “pull” you through? Can you succeed with your product at just the fabricator or SMTA level?

What are your strategies? Long term? Short term? Will you establish new alliances and joint ventures or programs? Will you target new, improved, less expensive items for existing markets, or concentrate on developing new not-in-kind technologies? Will you focus on potentials in the new emerging wearable segments?

*Making holes conductive" in  printed circuit fabrication (electroless copper, graphite, carbon, and organic systems) accounts for a little more than 0.1% of this total. Substrates (laminates and prepregs) are a little more than  1.7% of the $490 billion.

Foxconn, with more than two dozen plants in China is planning to spend a "few billion dollars" over the next 5 years to build 10+ EMS facilities in India.  China's Xiaomi has already announced their intent to build a facility there.  Chairman Terry Gou said that Foxconn will work with India's smartphone maker Micromax Informatics as well as Chinese customers. The newly announced plans prompted speculation as to the reasons why Foxconn recently closed a mobile phone operation in southern India.

Leading edge (14nm) production in Texas and New York - but where are the Americans?

Samsung Semiconductor said that it will have 10-nanometer FinFET chips in volume production by the end of next year. The company showed a 12-inch wafer with what it said were 10nm FinFET semiconductors at an event in San Francisco.

Over the next 18 months, Samsung will provide process design kits and multi-die wafers for the 10nm FinFET chips.  Meanwhile the company is ramping up volume production of 14nm FinFET chips in South Korea and Austin. Global Foundries will also implement the Samsung 14nm FinFET process at its chip-making facilities in New York State.

A critical moment for China?

China's growth rate is continuing to slow. Companies that once were enticed by China's welcoming incentives and low labor rates are moving out. This emigration is even beginning to include some of its "hi-tech" operations. These companies will not return.  The mandated labor rate increases coupled with increased social costs and elimination of incentives to locate new operations in China will cause a further reduction in the growth rate - one that cannot be offset by minor reductions in interest rates. Increased automation may cause long range unemployment or underemployment that must be offset with new business.

The current global economic situations, currency fluctuations, work force availability pale in significance to China's power to control virtually control all major aspects of  its own country including inflation. What is needed is a rapid decision to stop "killing the goose that laid the golden egg" behavior. To reinvigorate its economy it must cease the nearly 20% annual labor rate increases of the past few years.

According to an AP report, China, under President Xi Jinping, is also starting an Asian Infrastructure Investment Bank and has enlisted 57 countries to sign up. Such a venture is designed to broaden China's practice of using its state-owned companies and its workers on foreign capital projects. Britain, France and Germany, members of the World Bank and Asian Development Bank (WB&ADB) have broken with Washington and are seeking membership. The U.S. and Japan, leading shareholders of the WB&ADB, have expressed concern over the new bank's governance standards and the types of projects it might finance

On the other hand, what countries will benefit from the never-ending search for lower manufacturing sites? The Philippines (again?)? Mexico (again?). Vietnam (too late - too busy?)? India (need for infra-structure?). Indonesia? Malaysia? Will China's emerging electronics "giants" also seek off-shore sites to compete globally?

And, what actions will the U.S. and other Western economies institute to take advantage of the opportunities? Or, are they too internally divided to recognize, let alone take advantage, of the current situation?

Jabil Circuit, Inc. has secured approval from the Penang State government in Malaysia to purchase 20 acres of land at the Batu Kawan Industrial Park to support expansion plans. The company plans to further develop the Jabil Penang facility to support the company’s growth strategy in the Asia-Pacific region.
Jabil says that it chose Penang to expand its Malaysia operations due to the local availability of highly skilled talent; the mature local supply chain, which has around 3,000 well-developed suppliers from a variety of sectors; and the region’s excellent utility services. It plans to create 2,500 new skilled jobs there during the next 5 years.

MFLEX (Multi-Fineline Electronix) reported net sales for its first quarter ended March 31, 2015 of $149.1 million, an increase of approximately 27% more than the same period last year. The company's largest customer accounted for 65% of net sales and to newer customers accounting for approximately 30%, or $45.2 million. Two of these accounted for about 27% of sales for the quarter.
Net income $9.1 million for the period compared to a net loss for the same period last year. The The company generated $20.2 million in cash flows from operating activities during the first quarter. It had cash and cash equivalents of $155.4 million on March 31, 2015. MFLEX continues to maintain a strong balance sheet with no debt.

The age of the IoM in the IoT is upon us!

Two bold quotations from John Dulchinos, Jabil’s vice president of digital manufacturing: "...the model that’s served the industry so well for decades – locating in low-cost labor regions has reached its end. We’re seeing a greater demand for higher-skilled labor, driven by the reliance on digital and advanced technology, requiring that we rethink how we deploy automation in our operations." and "At last we’ve moved beyond the traditional manufacturing robot, and are seeing real world applications today of smart, collaborative robots that deliver three very key capabilities to advance manufacturing."

TTM and Viasystems announced that the companies have received notice from the Committee on Foreign Investment in the United States ("CFIUS") that it has concluded its review of TTM's proposed acquisition of Viasystems and determined that there are no unresolved national security concerns with respect to the proposed transaction. The proposed acquisition remains subject to review by the United States Federal Trade Commission TTM expects the acquisition to close in the second quarter of 2015.

At best, the situation in the first half can be described as an environment filled with mixed messages,” ASE chief operating officer Tien Wu said, citing a downturn in the PC industry and tight inventory controls in the semiconductor supply chain.